Search This Blog

Amid the global economic crisis, China rises

Global economic crisis accelerates China's ascent, but what role will it play?

* By Joe Mcdonald, AP Business Writer

BEIJING (AP) -- The auto-parts maker Delphi Corp. is headquartered in Troy, Mich., in the heart of the region that made the United States the car capital of the world. It's a place where the phrase "buy American" is right at home.

Now the 3,000 employees of Delphi's brake and suspension unit are getting a new boss. Battered by weak sales, Delphi is selling the unit to investors led by a company named Shougang Corp.

Shougang is a steel maker owned by the government of China -- a government that calls itself communist but espouses a "socialist market economy" as it marches down globalization's road toward a capitalistic future.

"Everyone's so desperate for cash that the Chinese show up with a checkbook and people say, `Yes, please'," says Arthur Kroeber, managing director of Dragonomics, a Beijing research firm.

Explosive growth in China and India, coupled with Japan's clout as the world's No. 2 economy, has long been expected to shift economic power from the United States to Asia as this century progresses. The financial crisis and resulting Great Recession are accelerating that process.

"China certainly comes out of the crisis stronger rather than weaker, and it's the opposite for the United States," says Stephen Roach, chairman of Morgan Stanley Asia.

Even some Americans have begun declaring this the "Chinese century" since it began nearly a decade ago. But while they and others fear the rise of China in international relations and the global economy, the reality is less dramatic: Beijing is still getting its own sprawling, chaotic house in order and is in no position to supplant the United States as global leader in the near future.

At the same time, Beijing's power remains undefined: On an unfamiliar global stage, it is unsure what role it wants to play.

For decades, China followed the dictum of its late supreme leader, Deng Xiaoping, to keep its head down abroad and focus on development at home. But earlier this decade, emboldened by success and mindful that their globalized economy needs stability, communist leaders started pressing for a place among the nations that manage world affairs.

These days, Beijing is claiming a bigger voice in global economic forums such as the Group of 20 and is getting more deference in the United Nations, which could mean protection for friends such as Iran and Myanmar. Its military spending is the world's second-highest, behind that of the United States.

"China is very likely to be the second-most-powerful country -- if it isn't now, then within a decade," says Kenneth Lieberthal, director of the Brookings Institution's John L. Thornton China Center in Washington.

For the United States, it's a mixed blessing. The American and Chinese economies are intertwined, and the success of one depends on the health of the other.

The United States is China's biggest trade partner. China sent $338 billion in goods here last year. Beijing is Washington's biggest creditor, with more than $800 billion invested in government debt. American automakers look to China's growing market to propel future sales.

The financial crisis set back U.S. growth by years and will add trillions to the federal debt over the next decade. But China avoided the worst of the crisis. Its banks are healthy and, with the help of a 4 trillion yuan ($586 billion) stimulus, this year's economic growth is on track to top 8 percent.

Already, demand from China can affect oil prices, and it is starting to influence what products are available worldwide. Western jobs are tied to Chinese spending, from British auto factories to Australian iron mines. Chinese money is financing development of oil fields from Venezuela to Central Asia.

And China's role as Washington's lender-in-chief is altering the dynamic of the countries' relationship.

At a meeting in London in April, President Barack Obama assured his Chinese counterpart, Hu Jintao, that Washington would cut its budget deficit -- a promise no American leader ever had to make to a Soviet leader.

Washington's three-year-old strategic dialogue with Beijing has long been dominated by U.S. trade grievances. But the latest round in July, overshadowed by America's need for China to keep buying its debt, became a discussion between equals.

China, a major destination for foreign investment, was starting to reverse the flow and invest abroad before the financial crisis. The crisis accelerated that and has led to a flurry of deals. In some cases, Chinese companies have stepped in to save Western jobs -- a notion unthinkable a decade ago.

In Britain, China's Nanjing Automobile Group plans to reopen the Longbridge factory idled by the collapse of MG Rover to make limited-edition MGTF sports cars. And in Sweden, Beijing Automotive is joining a bid to buy Saab from General Motors, while Geely Automobile wants to acquire Ford's Volvo unit.

"It's better to be part of the race than to watch it from the stands," says Paul Akerlund, a union representative at Saab. "We see advantages in gaining access to the Chinese market, which is the fastest-growing auto market in the world."

In diplomacy, China is only starting to stake out positions on a wide array of global issues. It has used its influence in the United Nations to help allies such as Sri Lanka resist Western pressure on human rights. But Chinese leaders have yet to decide what overall political and military role they want abroad.

"They clearly want to be a country of some gravitas both regionally and globally," Lieberthal says. "But there are a lot of aspects of the American approach -- too ready to interfere, to tell others what to do -- that the Chinese criticize as `hegemonic.'"

Even as it is on track to overtake the American economy in size as early as 2030, China is burdened by enormous problems of corruption, poverty and pollution. Measured by income per person, China ranked 130th out of 210 economies in a World Bank survey last year, behind most of Latin America and parts of Africa.

"China's foreign currency reserves are huge. But that does not mean we are a rich country," says Cho Tak Wong, chairman of Fuyao Group, which produces glass for Chinese and global automakers. "We are about 100 years behind the United States."

China also has become a fast-growing market, and the financial crisis has only increased its importance to global companies. Chinese demand affects everything from global steel prices to the design of consumer goods. Cadillac created its 2008 CTS with China in mind, adding a deeper back seat for Chinese buyers driven by chauffeurs.

Other countries' urgent need for cash has created opportunities for Beijing to make deals for resources to drive its booming economy. State companies have struck oil deals in Brazil, Venezuela, Russia and Africa and bought stakes in Australian and Canadian miners.

Delphi turned to Chinese buyers for its remaining brake and suspension operations after it sought bankruptcy court protection four years ago. The buyers are Shougang and two partners -- the Beijing city government and an auto-parts maker, Tempo Group. Delphi says the $90 million sale should close in November, seven months after it was announced.

Contrast that with 2005, when Chinese oil company CNOOC Ltd. tried to acquired Unocal Corp. CNOOC offered to pay more than a rival American bidder but withdrew after critics in Washington said the sale might threaten U.S. energy security.

Still, the United States has many strengths that China lacks. The U.S. remains the world center for innovation in many areas and a magnet for smart, ambitious immigrants.

"Europeans may hope that the U.S. has been knocked down a peg or two, but even if that is so, they could be in for a nasty surprise," says Howard Wheeldon, senior strategist at BGC Partners, a London brokerage. "Never underestimate the ability of the American people to rise to a challenge."

AP writers Robert Barr in London and Karl Ritter in Stockholm contributed to this report.

Get link

Facebook

Twitter

Pinterest

Google+

Email

Other Apps

Comments

Popular posts from this blog

Hi all…I found this article on getting into Goldman Sachs. By the way, my professional specialization is management consulting for the financial services industry….so my life’s not only about slimming down and making money online…hahah and…I hope that makes me less bimbo-ish? hahaAnyway, for those who are fascinated about Goldman Sachs as “The Firm” to get into…the article below may prove useful to you :)====================================================Want to land a job at ‘The Firm’? Here’s how, by those who’ve done it before.1) Interview again and again (and again)Most front-office banking jobs involve a handful of interviews. Jobs at Goldman involve a dumper-truck full. We spoke to one former executive director at the bank, who joined as an associate back in the late 1990s. He had 47 interviews for the role.“Back in those days, there was a real feeling that hiring by consensus was the way to go,” he says. “Two people tried to veto me and I had to re-interview with them and conv…

By Shawn Langlois Published: Oct 31, 2017 1:35 p.m. ETSHARE101‘If you stick your head in the sand and pretend that this isn’t anything to be concerned about, you aren’t going to like what comes next.’ReutersWarren Buffett participates in the newspaper tossing challenge.Warren Buffett once described his favorite market indicator as “the best single measure of where valuations stand at any given moment” and that when the metric exceeds certain levels, like it did back in 2000, “you are playing with fire.”If that’s the case, investors might want to blow out that candle.Put simply, the Buffett indicator is the total market capitalization of all U.S. stocks relative to the country’s gross domestic product. When it’s in the 70% to 80% range, it’s go time. When it moves well above 100%, it’s time to tap the brakes.The metric sits at almost 139% at the moment, which is getting awfully close to the record 145% it hit during the peak of the dot-com bubble in 2000, the only other time the number …

The following article is based largely on the author’s summer internship experience at Banc of America Securities, as well as on interviews conducted with the other analysts at the bank.

Investment banking. For an eager job seeker, these two words conjure up magical images of skyscrapers silhouetted against the night sky, high-powered men in pin-striped suits making deals that change the course of the stock market, and glamorous lifestyles paid for by huge bonuses. Looking in from the outside, investment banking may indeed seem like a dream job. The mysterious and oh-so-enticing world of high finance lures the unwary with promises of big paychecks and even bigger opportunities, and hapless econ majors flock to Wall Street like bees to a honey pot. While many of them know what they are getting themselves into, having had internships or otherwise done extensive research, a fairly large portion enters investment banking with only a vague idea of what it entails or the sacrifices that…

A simple girl interested in sharing financial tips and news from the United States and Singapore. Many people focus on how to get rich. But some forget that their eventual objective is to be happy. And some also forget that the best way to be free from poverty and maintain wealth after getting rich is to be free from scams.